Wednesday, November 14, 2007

Will Arbitration Deny Litigants their day in Court?

In today’s Financial Times, Patti Waldmeir in her article The Renationalisation of American Justice praises the development of arbitration as a good thing. “Over the past 20 years, America has created a superior system of second-hand justice: arbitration, mediation, and other increasingly creative forms of privatised justice have replaced the elusive American trial,” she writes. “But in a world where only 2 per cent of lawsuits ever get to trial, second-hand justice from an arbitrator is better than none at all.”

She also raises some concerns in Congress and elsewhere that arbitration has some negative aspects. In Congress, she writes, “the complaint is that Americans are being denied their day in court when they sign contracts that force them to arbitrate disputes with companies that provide everything from their mobile phones to their jobs.”

A recent post in the WSJ Law Blog called The Supremes Arbitrate Arbitration reported that the Supreme Court is considering in Hall Street v. Mattel whether the Federal Arbitration Act prevents a federal court from enforcing a party’s clearly expressed agreement to appeal an arbitration award rather than the limited grounds of appeal provided for in the FAA. The FT article says that the case raises a host of important questions. “What role should the government have in supervising the private resolution of disputes? Should rivals who agree to arbitrate a dispute privately also have the right to call in a judge at the last minute, to pronounce on whether the deal is fair? Or would that defeat the whole purpose of privatising justice?”

Will arbitration replace the court house? Is it as good as or better than the courts? Is it biased in favor of corporate America?